Mobile phones are like small computers that individuals can carry and use anytime, anywhere, with a rapid enhancement of transmission speed and data processing capability. Qualcomm has been pushing the frontiers of technology forward to lead the industry in telecommunication technology and chipset service. In addition to the technology, their business model is also an important factor. The business model which Qualcomm will continue pursuing cannot be explained without referring to Asia. This lecture focused on how the mobile phone world is changing driven by interactions between Qualcomm and Asia.

Qualcomm was founded in San Diego, California in July 1985, by Dr. Irwin Jacobs and 6 co-founders. The company name was a combination of the words QUALity and COMMunication. First, Qualcomm had no other products to sell except their "motivation" and "knowledge" in being able to innovate in the wireless telecommunications field. They had developed CDMA (Code Division Multiple Access) technology for 5 years after introducing its concept while running side businesses to cover funds for the company's operation. Although it was said that CDMA would not work on a mobile communication terminal, they spent much effort on proving it would work. Their efforts bore fruit: CDMA was accepted as an industry standard for cellular communications in 1993, and the first CDMA commercial service was launched in Hong Kong in 1995. Later in 1996, companies in South Korea and the U.S. launched CDMA commercially. CDMA service was finally launched in Japan in 1998. Today every major carrier except Wilcom has adopted CDMA technology.

1985 Qualcomm founded by Irwin Jacobs and 6 co-founders
1988 CDMA concept first introduced
1989 Field demonstration in San Diego
1993 The U.S. Telecommunications Industry Association (TIA)
          adopted CDMA as a wireless standard
1995 1st CDMA service launched in Hong Kong
1996 Korea and the U.S. started CDMA services
1998 Japan (KDDI) launched CDMA service
1999 CDMA selected as 3G standard
1999 Infrastructure division sold to Ericsson
2000 Handset division sold to Kyocera
2000 1st 3G service (CDMA2000) launched in Korea
2001 1st WCDMA service launched by NTT DOCOMO
2010 Over 1 billion 3G subscribers worldwide

CDMA, which employs spread-spectrum technology, allows sharing of a broad spectrum among multiple adjacent wireless base stations and mobile terminals. A particular wave form, the pseudo-noise (PN) code, is allocated to each terminal to allow data of a specific terminal to be taken from mixed signals. CDMA has become a mainstream technology of 3G mobile phones, and is used for W-CDMA and CDMA 2000.

Number of employees: 17,500 (FY 2010 ending September)
Locations: 139 worldwide (FY 2010 ending September)
Licensees: over 190 companies (December 2010)
Sales revenues: $10.991 billion=\934.2 billion (FY 2010 ending September)
Sales composition by division in FY 2010 ending September: Qualcomm CDMA Technologies (QCT) generated more than 60% of sales revenues.
Sales composition by region in FY 2010 ending September: sales in Asia accounted for more than three quarter of total.

Qualcomm does not deliver any end-products, but works in the research and development of wireless communication technology (CDMA/WCDMA/OFDM/OFDMA) and offers licensing and chipset/software development services. Their business is focused on technology development (license/semiconductor/service/application). They have an investment cycle type business model in which they offer black-boxed outcomes of research and development to partners in the wireless industry while continuously reinvesting in research and development. A part of the sales prices of end-user devices is paid back as a royalty in the end. The royalty rate is 5%.

Qualcomm, now having a self-described "enabler" business model, had produced mobile phones and base stations for 5 years since 1995 to 2000. However, they sold their handset division to Kyocera in 2000 and the infrastructure division to Ericsson. There was a big discussion about whether they could expand business by supplying only technology development and semiconductors, stepping out of the role of an end products manufacturer, but they reached a decision by respecting the spirit of the founders who valued technology. No company had such a business model in the telecommunication industry at that time. The differential advantage of black-boxed products and a well-planned business system are the key elements of Qualcomm's competitive strategy.

3G users are expected to increase at a rapid pace all over the world in the future as well because of a continuous progress of wireless telecommunication and digital technology from the new smart device market including a smartphone tablet and equipment with wireless communication capabilities other than mobile phones on devices. The emerging market, especially in Asia, is anticipated to expand with the spread of 3G. Asia currently accounts for 70% of 3G sales.

New companies have been established recently in China, Taiwan, and South Korea emulating Qualcomm's business model. They offer distributors and dealers existing technologies which have been developed to a certain level, meeting future needs, and can be copied, such as semi-finished products based on semiconductor chip, at a low price. That will accelerate commodification of products. Therefore, the Asian challengers, which have taken advantage of this trend, can be a threat for Qualcomm in sustaining their edge in technology development and technological capabilities.